Walk through the bustling Balogun Market in Lagos or the sprawling Sabon Gari in Kano, and you aren’t just looking at commerce; you’re looking at the heartbeat of Africa’s largest economy. Nigeria’s informal sector — comprising street vendors, artisans, and “mama-puts” — accounts for roughly 65 percent of the nation’s GDP and over 80 percent of its employment.
Yet, for all its vibrancy, this sector exists in a shadow. It is an economy built on cash, memory, and “gentleman’s agreements.” For the average trader, this lack of formal structure is a ceiling. Without records, there is no credit; without data, there is no growth. However, the rise of Generative AI (GenAI) is starting to offer a bridge between the chaotic hustle of the marketplace and the structured world of formal finance.
The barrier: Why “Going Formal” fails
For a small-scale trader selling Ankara fabrics or spare engine parts, formalisation often feels like a trap rather than an opportunity. It usually means complex paperwork, tax obligations they don’t understand, and expensive accounting software that requires a degree to operate.
The primary hurdles are:
- Poor record-keeping: Most transactions are verbal or scribbled in weathered notebooks.
- Opaque pricing: Prices fluctuate based on “gut feeling” or the customer’s appearance, leading to inconsistent margins.
- Compliance fear: A lack of clear information makes the regulatory environment feel predatory rather than protective.
Enter generative AI: The assistant in every pocket
Unlike traditional software, Generative AI — like the tech powering ChatGPT or specialised local bots — understands natural language. In a country with varying literacy levels and over 500 indigenous languages, this is the “killer app.”
- Seamless record-keeping via voice
The greatest gift GenAI offers the informal trader is the removal of the keyboard. Imagine a trader finishing a sale and simply speaking into a WhatsApp voice note in Pidgin, Yoruba, or Hausa: “I just sold three bags of yellow garri to Mrs. Okoro for 45,000 Naira on credit.”
A GenAI backend can parse that audio, extract the data, and automatically update a digital ledger. It categorises the expense, notes the debt, and tracks inventory. By turning conversation into structured data, GenAI builds a financial identity for someone who previously had none. This ledger becomes the “proof of life” required by banks to finally grant small-business loans.
- Intelligent pricing and market intelligence
Many informal traders struggle with “margin creep” — the phenomenon where rising costs of transport and fuel eat away profits because the trader hasn’t adjusted their prices fast enough.
GenAI can act as a real-time consultant. By feeding the AI data on local fuel prices, exchange rates, and competitor trends, it can suggest optimal pricing. A trader could ask, “Diesel went up 20% this week; what should I charge for a delivery to Lekki to keep my 15% profit?” The AI provides an instant, data-driven answer, moving the trader from “guessing” to “calculating.”
- Demystifying compliance
Compliance is often a barrier because of the “legalese” involved. GenAI can serve as a bridge, translating complex tax codes or registration requirements into simple, actionable steps. Instead of hiring an expensive consultant, a tailor can ask a bot, “How do I register my business name with the CAC, and what is the simplest tax bracket for me?” The AI can even help draft the necessary documents, lowering the cost of entry into the formal system.
The human element: Trust and localisation
For this to work, the technology cannot feel “foreign.” It must live where the traders already are — primarily WhatsApp and Telegram.
The “human-like” nature of GenAI is its greatest strength here. If the AI sounds like a helpful apprentice rather than a cold government entity, trust is built. We are seeing the emergence of “Agentic AI” — systems that don’t just answer questions but take actions, like sending a polite payment reminder to a customer who hasn’t settled their tab.
While the potential is massive, the “digital divide” remains a hurdle. Data costs in Nigeria are high, and smartphone penetration, while growing, isn’t universal. There is also the risk of “hallucinations” — where an AI might give incorrect tax advice or mess up a calculation.
However, the trend is clear. Formalisation shouldn’t be about forcing traders into a rigid box; it should be about giving them the tools to see their own value.
By using Generative AI to handle the “boring” and “scary” parts of business — the accounting, the pricing models, and the legal hurdles — we allow Nigerian entrepreneurs to do what they do best: innovate and trade. Formalising the informal economy isn’t just about taxes; it’s about empowerment. When a street vendor has a digital record of their success, they cease to be “invisible” to the global economy. They become a bankable, scalable, and sustainable business. In the palm of their hand, they finally have the power to turn a side hustle into a legacy.
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Olusegun Afolabi has a first degree in biochemistry from the University of Ilorin, Nigeria, and a master’s in computer science from Hertfordshire University in the United Kingdom. He is an AWS solutions architect professional, a Microsoft certified Azure solutions architect expert, co-founder and chief innovations architect of Face Technologies UK Limited. He can be reached at … and on Linkedin: https://www.linkedin.com/in/olusegun-afolabi-307931184/
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